EaaS can take various forms. For example, a commercial building may contract an EaaS provider to install and operate a rooftop solar system, which generates electricity for the building and feeds excess power into the grid. The EaaS provider would handle the financing, installation, and maintenance of the solar panels, while the building owner would pay a fee for the energy generated by the system.
EaaS can offer several benefits to customers, such as reduced upfront costs, improved energy efficiency, and access to the latest technologies. It can also help customers to meet sustainability targets and reduce their carbon footprint.
History
The concept of EaaS has been around for several years, but gained more traction in recent years due to advances in technology and a growing demand for energy efficiency and renewable energy solutions. Consumers’ expectation for bundled digital services with fewer touchpoints to different providers is also driving this change.
Traditionally, energy such as electricity is sold as a commodity by the unit to a passive consumer. In the early 2000s, energy markets grew more complex with the arrival of intermittent renewable energies. Industry therefore saw a need to simplify their energy requirements and the potential to reduce costs and thus began exploring the idea of outsourcing energy management to third-party providers. However, the concept of energy as a service did not extend beyond commercial customers until the mid-2010s, when advances in technology and a substantial rise in the adoption of renewable energies made EaaS more feasible and attractive to private consumers as well.
One of the earliest forms of EaaS was lighting as a service, which emerged in the early 2010s. Since then, EaaS has expanded to include a variety of energy solutions, such as solar as a service, battery storage as a service, and energy management as a service. These solutions have helped to address a range of energy challenges, from reducing carbon emissions to improving energy resiliency and reliability.
In practice
Lighting as a service
Under this model, a company provides lighting solutions to commercial and industrial customers on a subscription basis. The company installs and maintains the lighting system, and the customer pays a monthly fee for the service.
Solar as a service
In this model, a provider installs solar panels on a customer's property, and the customer pays a fee for the energy produced by the panels. The provider owns and maintains the solar system, and the customer benefits from renewable energy without the upfront costs.
Energy management as a service
This model involves the use of energy management software to monitor and optimize energy usage in buildings or facilities. The provider uses the software to save costs for example by maximizing self-consumption or shifting loads to low price periods. The customer pays a recurring subscription fee for the service.
Heating and cooling as a service
In this model, a provider installs and maintains heating and cooling systems in a building or facility in exchange for recurring payments.
Battery storage as a service
Under this model, a provider installs and maintains a battery storage system on a customer's property. The customer pays a fee for the energy stored in the batteries, which can be used during peak demand times or power outages.
Benefits
Reduced upfront costs
One of the main advantages of energy as a service is that it helps customers avoid the high upfront costs associated with purchasing and installing energy systems. Instead, customers pay a regular fee for the energy service, which can make it more affordable and accessible.
Improved energy efficiency
EaaS providers often specialize in energy efficiency solutions, which help customers reduce their energy consumption and costs. This can be particularly beneficial for commercial and industrial customers that have high energy demand. This not only lowers emissions but also unlocks system-wide benefits by reducing energy demand and easing grid congestion.
Access to new technology
EaaS providers are often at the forefront of energy innovation, and can provide customers with access to the latest energy solutions and technologies. Lower upfront costs for new solutions makes them more agile and adaptable, allowing them to more easily unlock new revenue streams, increase their competitive advantage and remain future-proof. It also helps their customers reduce costs and carbon emissions.
Reduced maintenance and operational costs
EaaS providers typically handle the maintenance and operation of energy systems, which allows them to focus on their core business activities and reduce the burden on end users.
Criticism
Potential long-term costs
While EaaS can help customers to avoid upfront costs, the long-term costs of the energy service can add up over time. Customers should carefully consider the pricing structure and terms of the service to ensure that it is cost-effective in the long run.
Limited control
When outsourcing energy management to a third-party provider, customers may have limited control over energy systems and operations. This can be a disadvantage for customers that prefer to have more control over their energy use and management.
Dependency on the provider
EaaS customers may become dependent on the provider for energy services. This dependence may lower the customer’s bargaining power and allow the service provider to increase prices.
Evolving roles of players
Energy as a service is changing the roles of players in the energy industry, by making holistic digital solutions more important. Partnerships and ecosystems are more crucial than ever, so that complexity takes place behind the scenes and end users have fewer touch points with providers. It also increases the importance of digitization. Manufacturers, for example, are no longer selling isolated devices, but also comprehensive services. Utilities and energy providers are also providing more holistic energy solutions that put the customer first.
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